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Let us say a prayer for Best Buy as the company attempts a daring
overhaul. There is surprisingly good news on this front, and we’ll get
to it in a moment. Suffice it to say, the stakes are
extremely high, since failure could mean that ten years from now, quite a few
of the things Americans buy other than food will necessarily come from Walmart, Costco and Amazon. For USA shoppers used to
limitless variety, this would be Bedford Falls without George Bailey. Bleak
as that may sound, it hardly exaggerates the
possible endgame of a trend that has seen vacated storefronts spread like a
pox across America. Big-box operators in particular have been failing at an
alarming rate, leaving gaping holes in strip malls and once-thriving city
streets. The Great Indoors, Hollywood Video, Linens ’n Things, K.B.
Toys, Borders, Montgomery Ward and Woolworth’s were all household names
that have vanished from the retail landscape if not yet from memory.
Competition in the consumer electronics business in particular has
been brutal, laying waste not only to CompUSA and Circuit City in recent
years, but, before them, to Tweeter, Federated, The Wiz, Crazy Eddie,
Incredible Universe, Musicland, The Good Guys and Computer City. This is
capitalism’s “creative destruction” at its most
devastating, and it could continue to ravage the retail scene for years to come.
Just ponder the list of big-box survivors whose days could be numbered:
Sears, Barnes & Noble, Bed Bath & Beyond, JC Penney, Macy’s,
Nordstrom, Office Depot, Office Max, Staples, Toys R Us, Blockbuster
Video. Sears, which has been dying since the 1980s,
few will miss. But if two far better emporiums, Macy’s and Nordstrom,
fail, we’ll all be buying pants the same way we now buy shirts:
“One-size-fits-all-orangutans”.
The Good News…
Now for the good news: Best Buy’s future has been entrusted to a
guy with some very good ideas and a solid game plan. Stephen Gillett, 36,
came to the company from Starbucks, where as chief information officer he
helped pull the ubiquitous coffeehouses out of a steep dive. At Best Buy, his
goal is to build on the firm’s main strength: showrooms that are
everywhere. Nor is their drawing power in doubt. With $50 billion in revenues
last year, Best Buy sold more PCs, cameras and phones than any other consumer
electronics vendor in the world, including Walmart
($35 billion) and Amazon ($14 billion).
So how does Best Buy get customers to buy the stuff they’ve come
to the showrooms to examine? Gillett’s plan is simple: put experts on
the sales floor who can provide in-depth answers to shopper’s
questions; then, do your best to match or beat the competition’s lowest
price, online or off. Concerning the sales-force upgrade, most of Best
Buy’s floor personnel are generalists with just a smattering of
knowledge about the various products they sell. Under Gillet’s
regime, they’d be more like the whizzes at Apple stores, able to
provide detailed information and a level of service that has been sorely
lacking at Best Buy stores since the chain was founded in 1981.
A Jump on AMZN, eBay
Keep in mind that the company already has a formidable presence
online, operating the 11th largest ecommerce site and growing
sales revenues, currently around $3 billion, by more than 15% per quarter.
Ecommerce could account for fully half of Best Buy’s revenues within
three years. Meanwhile, shipments to the company’s 1,400 stores are
already quick and reliable, creating a ready-made distribution network
— like the ones Amazon and eBay are building — for online
shoppers who want to pick up their merchandise the same day.
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